Self Build Mortgages - What you need to know about building your dream home

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What is a self build mortgage?

Do you dream of building your own property? A property where you can customise every aspect of the design and build to your tastes and individual needs? Do you have land that you want to build on, or do you have your eye on the perfect plot but just need the finance to start the ball rolling? 
A self build mortgage is a type of specialist mortgage for customers that want to build their own property. You can use the mortgage finance to buy the land and then construct the property. Self build mortgages differ to standard mortgages as the funds aren’t released in one go, but in stages. As the property reaches various stages of completion, the lender releases funds to pay for the work involved. 

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What does a self build mortgage cover?

You can use a self build mortgage to finance several aspects of the build, including: 

  • The initial purchase of the land 
  • Some legal fees 
  • Building materials 
  • Labour for construction 
  • Property surveys 

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Why do some borrowers struggle to secure self build mortgages?

Some borrowers struggle to secure self build mortgages. This can either be due to their personal circumstances – e.g. failing affordability, poor credit history or lack of savings as a contingency. If a lender has concerns over the details of the project this can also affect your chances of securing a self build mortgage. 

Lenders consider self build mortgage finance high risk when compared to other types of mortgages. If something doesn’t go to plan the project could end up abandoned and the lender could lose money. 

Due to the specialised nature of self build mortgages there are also less lenders who offer this type of finance. This can make it harder to secure finance and is why it’s worth speaking to our team of mortgage advisors who can use their expertise to find a mortgage that’s suitable for your needs. 


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What is the eligibility criteria for a self build mortgage?

If you want to apply for a self build mortgage then you’ll need to meet the lender’s eligibility criteria. Whilst this can vary from lender to lender, you’ll need to: 

  • Have a deposit of 20-40% (depending on the lender and deal) 
  • Select a property which meets the lender’s criteria 
  • Choose a property whose construction is acceptable to the lender 
  • Provide a projection of how long it will take to complete your projects- some lenders have a 2 year cut off 
  • Have sufficient income to afford the mortgage repayments 
  • Have a satisfactory credit history 
  • Be able to evidence additional savings as a contingency to cover a shortfall in building costs 
  • Provide details of the land you are purchasing 
  • Show that you have (or are applying for) the appropriate planning permission 
  • Provide a detailed project plan including cost projections and timescales. The lender may also want the details of who will be carrying out the work

This list is not exhaustive and our mortgage advisors can go through all the criteria with you when you start your mortgage application. 

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How do self build mortgages work?

Self build mortgages work differently to many other types of mortgage finance. Instead of releasing all the funds upfront, with a self build mortgage, the lender releases the funds in stages. 
Lenders consider self build mortgages higher risk compared to other types of mortgage which is why they release funds in stages. Funds are typically released over 5-6 stages, in advance or in arrears, at the various stages of the house build. 

Typical stages may include:

  • Purchase of the land
  • Laying of the foundations 
  • Main build construction to eaves 
  • Waterproofing – Adding the roof etc. 
  • Installation of internal fittings – floors, ceilings, partition walls, doors, wiring etc 
  • Sign off of the building project (builder’s completion certificate produced)


    The exact point at which the lender releases the funds depends on the project and what you’ve agreed with them. The two main options are “in arrears” or “in advance”. 

In arrears - The lender releases the funds after the stage of work is complete.

The release of funds in arrears is the most common arrangement typically seen for self build mortgages. The lender releases the funds for the purchase of land and then at completion of each stage of the build. You’ll need to pay for this work upfront so will need to have sufficient savings in place to avoid any delays with your project. Some lenders prefer to release funds in arrears so that they aren’t releasing more funds than the property is worth – reducing the risk of them losing money if something goes wrong with the project. 

In Advance - The lender releases the funds before the work starts

If the lender chooses to release funds in advance, they will release a set amount based on your cost projections for each individual stage of the project. You’ll need to ensure that your projections are as accurate as possible. If there is a shortfall the lender is unlikely to release any more funds and you will need to cover the difference. 

Self build mortgages are usually taken out over a shorter term compared to other types of mortgage – up to 2 years. You’ll need to make monthly mortgage payments for the duration of the mortgage. The lender may allow you to make payments on an interest only basis until the initial building phase is complete. Once the build is complete, the lender will encourage you to switch to a lower rate residential mortgage. Before you do, contact our friendly team who can ensure that you are receiving the best deal. 

Can I get a self build mortgage if I already have another mortgage?

Many self build applicants already have mortgages on their current residential homes so it is possible to take out an additional self build mortgage. Lenders will assess your current income and finances to check both mortgages are affordable and will also want to know your long term plans. E.g. Do you intend to move into the self build property and sell your current residential? Will you let out the current property or will you retain both residences and live between the two? If you have any buy to let mortgages this shouldn’t affect your application for a self build mortgage as lenders consider buy to let mortgages to be self financing. 

Self Build Mortgage Rates

Fewer lenders on the market offer self build mortgages so rates can be more expensive as there is less competition. Rates can also be higher because lenders consider self build mortgages to be riskier when compared to other mortgage types. Whilst interest rates can be more expensive, often finding the right product deal which is the best fit for your property plans will be the higher priority for some applicants. When you work with the team at Simple Fast Mortgage, our advisors will find the deal that is right for you. Contact our friendly advisors to discuss your self build plans and get mortgage advice from the experts. 

Why Choose Simple Fast Mortgage as your self build mortgage broker?

Navigating the world of self build mortgages can be a complex endeavour with more intense requirements compared to other mortgage applications. Here at Simple Fast Mortgage, our team has extensive experience of helping to secure self build mortgage finance for clients wishing to build their own properties. We will find you the mortgage which is the best fit for your circumstances and advise you on all the paperwork you will need to provide. Our team will liaise on your behalf with the lender and using our experience and professional network of contacts to help your build get off to the best possible start. Contact our self build mortgage experts to secure your finance and start your dream build today


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